Small Business Cash Flow » Cash Flow Tips

Be Proactive to Prevent Cash Flow Fraud in Your Business

Denise O'Berry — Mon, 03 May 2010 01:21:55 +0000

Call it fraud, profiteering or theft. No matter what it´s called, some people on the payroll are robbing companies across America each and every day. Employee theft now costs American businesses at least $40 billion a year, according to the latest estimates from the U.S. Department of Commerce. I see news reports every week about some small business being ripped off by an employee. Are they robbing your small business?

Mari Reidy, executive-in-charge of Crowe Chizek and Company´s Forensic Services and Investigations (FSI) practice, said businesses could save millions of dollars if they followed certain business practices, took fraud more seriously and responded to instances of fraud swiftly and aggressively.

You should take key steps to prevent fraud in your business. Here are a few tips Crowe Chizek suggests your business follow to keep fraud in check.

1. Lay down the law. Employees need to understand the rules and the expectations of management. Do not take for granted that employees will understand that making long-distance calls on company time is unacceptable. Develop a specific code of conduct that describes what activities are unacceptable. Distribute the code to all employees and include it as part of all new employee information materials.

2. Create an ownership environment. Employees who act and feel like owners of the company generally are less likely to steal. A culture of ownership promotes shared responsibility of company successes and failures and a more committed workforce.

3. Keep employees informed. Information about the implementation of new policies and procedures should not be contained to the boardroom. Make sure employees know and understand new policies and procedures. Share information about why policies and procedures have changed.

4. Take action. When fraud is detected, take swift action and then put controls into place to help prevent the specific type of fraud activity from happening again. Too often, corporations deal with the fraudster but do not look for ways to prevent similar fraud from reoccurring.

Have you experienced fraud in your small business? Please share your experience.

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Treat Your Loyal Customers as Special as They Are

Denise O'Berry — Fri, 16 Apr 2010 00:48:17 +0000

It’s no secret that the newspaper industry is going down hill. They’ve had major cash flow problems for a while, way before the economy decided to go in the tank. And there are normally two primary ways to increase cash flow — increase sales or reduce expenses (of which they’ve done plenty).

Yesterday I got my annual renewal notice in my email box (ironic, isn’t it?). I don’t have any problems paying for products or services when I’m getting the same value in return, but it seems like every day the newspaper gets smaller and there’s a higher ratio of ads to content.

The price for a year of the paper was $195. When you break that down, delivery for only $3.75 a week isn’t a huge cost. Call me a dinosaur, but I love sitting down to read the paper — which takes me a lot less time these days because it’s so small. Plus, by the time I read the paper these days, most of the day’s news has already popped into my email box so it’s old news.

Old habits die hard though so I started looking around on the web for the subscription price of the same term, same newspaper for new subscribers.

And I was shocked.

I found the exact same subscription for $117 a year and $52 a year. These were both introductory prices and the price increases at the subscription end to $117/year, however let’s do some simple math. At the $117 price point, new subscribers can get two years for a mere $39 more than a loyal customer will pay for one year. For the $52 subscription, a new subscriber will get two years for $26 less than a loyal customer’s one year renewal.

They have to be losing their shirt on that discounted price.

Discounting your prices to bring new customers in the door is not a smart way to do business. It will have a severe effect on your cash flow in the short term and drive loyal customers away in the long term.

Your loyal customers should be treated like kings and queens. And your cash flow will show the proof.

What do you think? Am I making a big deal out of nothing? Do you think discounting to bring new customers in the door is a good approach? Please leave a comment.

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How Your Business Credit Card Can Help You Prepare Taxes

Denise O'Berry — Sun, 04 Apr 2010 19:31:43 +0000

Enjoy this guest article from Jud Hogan of Business Credit Card Source.

It’s getting to be that time of year. When the weather begins to warm, flowers begin to bloom and the IRS comes to collect from you. Yes, it’s tax time… again. But it’s not all doom and gloom. In fact, your business credit card can make preparing your taxes easier than ever.

So before April 15 rolls around here are a few ways to use your credit card to help you prepare and file your 2008 taxes.

Check Out Your Statements
If you’re like most business owners, most of your business related purchases go on your credit cards. Who needs receipts when you have credit card statements that document every single purchase? So if you need to write off a business lunch from August and your gas from traveling to see clients, all your purchases are documented through your statements.

Get The Year In Review
What’s better than a monthly statement? A year end one. More and more cards companies are providing their members with year end statements that list all of your purchases throughout the year and categorize them accordingly. Completely convenient and a huge time saver, they can even be exported directly to your money management or tax software for immediate use.

Go Paperless
Speaking of your statements… have you gone paperless? Not only does it save trees, postage and space in your filing cabinet, but online statements give you instant access to what you spent last week, last month and even last year. Many credit card companies even give you the opportunity to export your statements to your money management software making the process of preparing your taxes that much easier.

Let Technology Do Your Taxes
Well almost at least. As previously mentioned, many companies allow you to export your statements to computer software programs. Use software like Turbotax or Quicken? Exporting your statements will save you precious time and energy. By exporting your statements into the program, the software automatically inputs the necessary information. No need to manually enter transactions that you want to write off. How easy is that?

You can find information on the most popular business credit cards at http://www.businesscreditcardsource.com. Exclusively focused on business credit cards, entrepreneurs and business owners can browse reviews, compare cards and apply online.

What do you think?

Photo Credit: Paalia

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Don’t Drive Cash Away From Your Business

Denise O'Berry — Sun, 28 Mar 2010 21:54:40 +0000

If you’re selling online, one fleeting moment can drive a customer away from your business. You have just seconds to grab the attention of people that are cruising around on the interwebs.

And when you get someone who wants to buy, make sure you have the proper systems in place to allow that to happen. I’ve talked before about having the right payment options in your business to improve your cash flow.

Well here’s a perfect situation where an online business lost a sale because they didn’t have the right payment options in place. My friend PPCJen from Australia tweeted her frustration loud and clear!

Wouldn’t you hate to lose a $300 sale? The sad part is that this company will probably never know. I bet their not taking the pulse of the interwebs with a presence on Twitter. What do you think?

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Selling On Credit Is Risky Business

Denise O'Berry — Mon, 22 Mar 2010 01:42:01 +0000

How many times have you heard me say your small business is not a bank? Plenty I’m sure.

And although I encourage you not to sell to your customers on credit, I’m a realist and do understand it’s a must for many small business owners.

So I tapped into Ted Shalek, CFO of Smart Online, a company that specializes in technology based solutions for small business owners, who believes that the risks associated with selling on credit can be greatly reduced if the proper steps are followed.

“Since we do not all have the luxury of knowing and trusting each customer, we must take precautions to protect the cash flow of our small business,” said Shalek, an authority on small business. “If you do not know the customer, make sure that you obtain solid and confirmable information about the prospective customer by identifying their name, address, phone number, email address and business/credit references, credit card numbers if appropriate.”

Here are a few simple steps he recommends you take to significantly decrease the likelihood of future collections nightmares

>> Reminder Notice: Send out 7 days before the original, agreed upon payment date, if you have not received payment.

>> Read Receipts: In the email, let your customer know that you had an agreement, you provided the service or product on a timely basis and it is customer’s obligation to provide you with payment.

>> Stay Professional: Place a professional call to the buyer and/or the point person at your customer’s office. During the call, be firm and remember to state the facts and identify specific payment terms and times.

>> Appointments: If the amount owed is significant, make an appointment with the buyer to come by and collect the funds, and if they say the funds are not immediately available, keep the appointment and discuss specific payment terms and times.

>> Dramatic Impact: If the customer/buyer refuses to accept your calls and does not reply to emails requesting an appointment, stop by the customer’s office unexpectedly and tell them that you are prepared to wait on their premises until you receive payment or have a meeting with the owner, buyer or financial officer.

>> Collection Agency: Unfortunately, if the customer does not provide any positive feedback and refuses to acknowledge your communication, contact a reputable collection agency that will represent your company in a professional manner (remember that the collection company will retain a portion of the funds that collected from the customer).

Take care when selling on credit — and don’t forget you are not a bank. If it truly is necessary for your small business to grow, make sure you use proper care so you don’t set yourself up with collection problems down the road.

What do you think?

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Create a Referral Program to Pump Cash Into Your Business

Denise O'Berry — Mon, 22 Mar 2010 00:06:10 +0000

One really good way to help increase your cash flow is to establish a referral program that leverages your customers and contacts. There are several methods you can use.

One method for generating referrals as a growth strategy for your small business is to simply tell existing clients they’ll get a percent discount the next time they use your service if they refer a friend.

That’s how one small business owner has consistently grown her business. She says, “It’s almost guaranteed that my existing clients will continue to do business with me so they can cash in on their reward.”

Simple, huh? Leveraging your existing customer base is a really smart way to get referrals for your business. Make sure whatever strategy you use appeals to your market.

Using this strategy means you’ll also get a lot of good testimonials about your business. Many people don’t realize how easy it is to do that. If you’re wondering how to make this work in your business, hop on over and read ‘It’s Better When They Tell Them.’

If you’re looking for a strategic approach to generating referrals to help your cash flow, the Instant Referral System may be just what you need.

Do you have a favorite referral tactic to share?

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Timely Tips for Avoiding an IRS Audit from Tax Ninja

Denise O'Berry — Mon, 15 Mar 2010 10:33:51 +0000

If it isn’t one thing, it’s another. Seems like we just get one tax season over and another crops up. And from what I hear around the interwebs, the IRS is stepping up auditing activities this year (rumor).

So here’s some timely advice from a new character on the scene — the Tax Ninja.

Here’s a secret. Alan Olsen of GROCO is the Tax Ninja. He says there is no way to completely avoid being selected for an audit, however there are tips that you can follow to minimize your likelihood of being audited. Below are six tips to lessen the chance of your return being selected for an IRS audit:

1. Be honest – If you live by the simple rule of honesty, it will save you a lot of stress. It is wise to see that all of your expenses and deductions are accurate when recorded on your tax return. Mistakes happen, but avoid intentional ones.

2. Be organized – It is important to keep good records. Properly record any expenses that you are deducting on your tax return. Business expenses such as travel, meals, mileage etc. can be deducted, as long as they have been recorded. If the expense is minimal, a simple note written in a notebook or on a spreadsheet will work, but if the expense is large, keep the receipt. A receipt will help to prove an accurate deduction.

3. Report all interest – Collect all appropriate tax documents when your tax return is prepared. If your bank or other investment companies have not sent you 1099s for interest on accounts, contact them. The IRS has record of these documents and so you need to record them on your tax return.

4. Be prepared if you are self-employed – The IRS realizes that self-employment also increases the likelihood of unreported income. You must have proof of your income and business expenses if you are self-employed. You should not record personal expenses as business deductions.

5. Watch your deductions – If you take deductions that are unreasonable for your income bracket, this may raise a red flag to the IRS. The process that the IRS uses to select returns to audit starts with the IRS computer. The IRS computer gives each tax return a Discriminate Function Score (DIF score). During this process, the deductions that you take are compared to other scores within your income bracket. High scores result from unrealistic deductions within certain tax brackets. If a return receives a high score, it will be passed on to an IRS agent for review to see if any additional tax can be collected. If your deductions seem a bit unrealistic, you should have proof to back them up.

6. Use a tax professional – A tax return that is prepared by a CPA or other accounting professional is less likely to be selected for an IRS audit than a self-prepared return. A professional knows the laws and can help you to make sure that all proper deductions are taken and that all income is reported.

Taking these steps in preparing your return can help you to avoid possible red flags that could lead to an IRS audit. And who wants that to happen?

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How to Safely Choose a Collection Agency

Denise O'Berry — Sun, 07 Mar 2010 17:04:35 +0000

Have you gotten stuck with an unpaid invoice lately? Many small business owners have. What used to be an exception, now seems to have become more of a rule.

What should you do?

Fueled by a troubled economy, increased accounts receivables from debtors, and reduced staff, many businesses are now turning to professional collection services. With more and more shady agencies popping up due to the demand, you must be cautious about who you bring on as a partner.

Tony Reisz, CEO of Ontario Systems – the preferred technology partner for nine of the 10 largest collection agencies – is educating business owners on what to look for when hiring a collections agency. Here are five things he feels are important to consider:

1. Reputation – No company wants to be involved in shady collections practices, so check the agency’s credibility with the Better Business Bureau, Secretary of State, etc. While the agency itself will face the consequences if they are not compliant, your name can easily be tied to the violation. Some agencies even utilize advanced technology with compliance and best practices built-in, ensuring their representatives can’t violate your customers’ rights while collecting debt.

2. Recovery Rate – Understand the collection company’s recovery percentages and rates. Remember that the commission rate by itself is meaningless – net return is the key.

3. Industry Experience – This may seem obvious, but an agency working mostly in student loan collections may not be the best choice if you’re in the medical collections industry. Experience is often a good indication of quality.

4. Costs – Be sure to balance the commission charged with the agency’s success rate. Carefully consider and evaluate how an agency will reduce your costs, while improving efficiency.

5. References – Check references, particularly from clients that are in a similar business. Call the references and ask their opinion of the collection services, if they have had any problems, and what their typical success rate is.

Use these points to guide your choice of collection agency should you need to go that route. Thankfully, I have never needed to hire a collection agency. What about you?

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The Cash Flow Story In A Tiny Texas Town

Denise O'Berry — Mon, 28 Dec 2009 12:21:05 +0000

Watching cash flow through a community is interesting. This story landed in my email box — the result of viral movement of an interesting story. I don’t know who the original author is, but I would love to. If you know, please share. But in the meantime, enjoy!

It’s a slow day in the little Texas town of Port O’Connor. The sun is beating down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.

On this particular day a rich tourist from back east is driving through. He stops at the motel and lays a $100 bill on the desk and says he wants to inspect the rooms upstairs in order to pick one to spend the night.

As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmer’s Co-op takes the $100 and runs to pay his debt to the local mechanic, who has also been facing hard times and has had to offer his “services” on credit.

The mechanic rushes to the hotel and pays off his room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter.

At that moment the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything.

However, the whole town is now out of debt and looks to the future with a lot more optimism.

What do you think? Is this how it works? Share your thoughts by leaving a comment below.

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Your End of Year Bookkeeping Checklist

Denise O'Berry — Sat, 26 Dec 2009 12:48:43 +0000

Okay, so the holidays are over and it’s time to start thinking (and preparing!) for ending the year on a high note. Here’s an end of the year bookkeeping checklist from outright.com.

Record Transactions: Make sure you’ve recorded all the transactions from your credit cards, bank accounts and receipts. And don’t forget to check your online accounts, like PayPal, eBay and Freshbooks. Record every expense and dollar received for your business, no matter how insignificant or questionable. It’s better to have everything written down and recorded so you’ll be able to make the most from deductions—because if you don’t record it, it doesn’t exist.

Double Check: Make sure you aren’t missing any income or expense transactions—it’s worth it to take the time to double check. Make sure you have a digital copy of receipts from any online transactions, whether they’re sales or outsourcing work to contractors or websites, so you have a record of all your transactions.

Proper Categorization: Here’s where it gets a bit tricky, but well worth the time in the end. Make sure all of your income and expenses have been properly categorized. Categorizing your income (for the most part all “Sales”) is not nearly as critical as those deductible expenses. The Schedule C categories can be confusing but they make the difference; mileage under “Car and Truck Expenses” is deductible while “Other Expenses” are not. Web services such as Outright.com can do most of the categorization for you; but when in doubt, ask a professional or hire a bookkeeper.

Don’t Forget Mileage: Any work-related travel can count towards deductions. Make sure you’ve recorded all the time you’ve spent in the car going to and from work-related sites—you can deduct $0.55 per mile for these trips! Your daily commute doesn’t qualify but regardless, for many, the deduction adds up to thousands.

Complete Your W-9’s: To properly file a 1099 for any contract or freelance work you hired, you must have accurate taxpayer identification, in the form of an IRS form W-9. Now is the time to request the W-9 form from your contractors as 1099’s are due January 31.

Pay Your Estimated Taxes: To avoid penalties when taxes are due on April 15th, be sure you’ve paid enough in estimated taxes for the year. Final federal tax payments are due by January 15th. The fourth installment of your 2009 estimated taxes should bring you up to at least 90% of what your final total taxes are for the year. If that’s still too confusing, pay the same amount as you actually owed from last year. Here’s how: Work with the IRS.

Triple Check Profit and Loss: Finally you should look at your profit and loss statement for the entire year. If you can’t easily get one from your bookkeeping software, find another. Do the numbers seem reasonable compared to how your income and expense totaled in prior years? Yes, we’re effectively triple checking your income and those expenses. Search your pockets for receipts, don’t neglect that credit card that was cancelled because creditors are so stingy, and keep in mind that payment from your brother for some consulting.

Outright.com is the free online platform that manages all business finances, tracks income and expenses, and automates tax preparation. The company tracks over $1B in income from self-employed and micro-business transactions. They’re kicking off tax-time with their new W-9 automation to help get businesses organized for the months ahead.

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